Residents are liable for paying taxes on their Malaysian and world-wide source of income. Generally, residents are persons who spend 182 or more days in a year on the territory of Malaysia. Income tax has a scalable nature and reaches the maximum of 28%, depending on the total amount earned by an individual. Certain reliefs are available for residents; non-residents may not have any reliefs, but are liable to pay tax only on income derived within the territory of Malaysia.
Relief from double taxation of foreign-sourced income is available by means of bilateral credit if there is a tax treaty or unilateral relief if there is no tax treaty. The relief is restricted to the lower of Malaysian tax payable on the foreign-sourced income or foreign tax paid if there is a treaty or one-half of the foreign tax paid there is no treaty.
Malaysia individual income tax rates are progressive, up to 30%, after the deduction of tax reliefs. An individual with chargeable income of less than RM2,500 is taxed at zero rate. An individual is considered tax resident if he/she is in Malaysia for 182 days or more in a calendar year. Alternatively, residence may be established by physical presence in Malaysia for a mere day if it can be linked to a period of residence of at least 182 consecutive days in an adjoining year. Individuals who do not meet residence requirements are taxed at a flat rate of 30%.
A married couple living together may opt to file a joint or separate assessment.
Capital gains are not taxed in Malaysia, except for gains derived from the disposal of real property or on the alienation of shares in a real property company. The real property gains tax, which applied to such gains, had been suspended since 1 April 2007, but is reinstated at a rate of 5% as from 1 January 2010.
Stamp duty is levied at varying rates between 1% to 3% of the transacted value of property transfers and 0.3% on share transaction documents.
Real Property Tax
Individual states in Malaysia levy "quit" rent and assessment at varying rates.
Employees are required to make contributions to the EPF at a rate of 8% of remuneration and may contribute a nominal amount to the Social Security Organisation (SOCSO).
Administration & Compliance
Malaysia tax year is the calendar year. Tax on employment income is withheld by the employer under a pay as you earn (PAYE) scheme and remitted to the tax authorities. Malaysia imposes a self-assessment regime. An individual deriving employment income or business income must file a tax return and settle any balance owed by 30 April or 30 June respectively in the following calendar year.
Penalties at various rates apply for failure to comply.
Tax liability of a resident individual is reduced by rebates which are granted as follows:
• for an individual with a chargeable income not exceeding RM10,000, a rebate of RM110 is given. A further rebate of RM60 is given for his wife; a wife who is assessed separately will be entitled to a rebate of RM110 if her chargeable income does not exceed RM10,000;
• the equivalent of amount paid in respect of any zakat, fitrah or other Islamic religious dues which are obligatory;
• a sum of RM400 for the purchase of a computer by an individual or wife;
• the amount of fee paid to the government for the issue of an employment pass, visit pass or work permit.